Betta Salt: How to scare off investors #DHDL

The appearance of ‘Betta Salt’ seemed to have more potential to divide opinion than most. And not just in terms of divided opinions among the Lions, which seem to be quite common.

Rather, some of the Lions themselves seemed torn in their decision-making. Frank Thelen, in particular, never tired of emphasising how enthusiastic he was about the basic concept, but at the same time he did not hold back with his criticism.

In fact, the three-person founding team seemed to have developed the better salt: it is said to contain up to 50% less of the harmful sodium chloride and more healthy minerals, which also gives it a complex, less dominant taste.

And indeed, such a product seems sorely needed, as 99% of the world’s population probably consumes too much salt every day, far exceeding the 6g per day recommended by the WHO.

After the tasting, however, the lions quickly bring up a topic that seems to become the dominant component of this negotiation: a justification for the proposed 3.5 million post-money valuation is needed.

Since the background of two of the three founding members as master’s students at WHU in the Entrepreneurship programme had previously received good feedback, they refer to this again in their answer. Unfortunately, they have to admit that this was not a good idea.

When they mention the methods they learned, such as Berkus, VC or discounted cash flow, the lions burst out laughing.

One of the founders claims that he knew this would happen, but the question remains unanswered for viewers as to why he presented it this way.

However, a quick web search reveals to anyone interested that the methods mentioned are actually among the best known and most widely used. So why this reaction?

In fact, the latter, the discounted cash flow method, or DCF for short, has fallen out of favour, especially in the early stages of the start-up world. This is because it is based on assumptions about future cash flows, which can only be reasonably predicted once the start-up has been generating revenue for a while and can demonstrate a certain level of growth.

The VC method, on the other hand, is a good approach for looking at the valuation question from an investor’s perspective and adopting the appropriate mindset for negotiations – but it is also very imprecise and quite subjective, and is practically unusable as a sole approach.

Finally, the Berkus method evaluates a start-up according to various factors such as idea, team or market potential. However, each factor is valued at up to €500,000, which can quickly lead to a very high overall valuation. This may be partly explained by the fact that developer Dave Berkus is an American investor, and European start-up valuations are often significantly lower.

However, this quickly leads to another important point: such methods and procedures were often developed in and for other markets and are therefore not so easily transferable. Not only does the geographical component play a major role here, but also the temporal one: trends change, hypes such as sustainability and AI come and go, and political events can also have a strong impact.

Unfortunately, many founders forget this when they apply the methods they learned at university or business school to their own start-up and are pleased with the rather high result.

This is probably what the Lions meant by ‘self-optimisation,’ which happens quickly when you use these methods without taking other factors – and thus reality – into account.

But the founders seemed to take self-optimisation – or very optimistic self-presentation – a little too far for the Lions.

They claimed that there was so much demand for their product on the way to their actual planned B2B business model that they decided to also offer it B2C via an online shop – but when asked, they had to admit that they had only made €1,200 in sales so far.

Later, they claim to have ‘very good IP protection’ and assert that ‘no one will be able to copy this,’ even though they have not even filed a patent. However, when Frank Thelen reacts somewhat indignantly with ‘You can’t lie, that’s not okay!’, they respond with ‘I didn’t.’ And when asked, they correct themselves to say ‘we will have IP protection’. Even after rewinding several times, most viewers clearly understand this to mean ‘WE HAVE very good IP protection’, which, if the audio is not completely misleading, would in fact be a lie and therefore an absolute no-go for investor negotiations.

Now, very few investors have a camera running, and in the heat of the moment, not everyone will presume to have understood every word correctly beyond doubt.

But if you repeatedly gloss over things to your own advantage, you usually disqualify yourself completely as a start-up for serious investors.

This is because you lose trust, which is the most valuable – and at the same time most sensitive – asset in the investment process.

Once this trust is shaken, there is usually no way to salvage it.

This is an even worse misstep than applying theoretical valuation methods without reflection.